Ch.1 Concept Questions

Quartz Instruments had retained earnings of $145,000 at December 31, 2017. Net income for 2018 was $90,000, and dividends for 2018 were $30,000. What amount of retained earnings should be reported at December 31, 2018?

$205,000

Rahls issues stock to investors for $20,000, and has $5,000 of net income in its first year of operations. During Year 2, Rahls earns $10,000 in net income and pays a dividend to stockholders of $4,000. What is the balance in stockholders' equity at the end of year 2?

$31,000

Gem Corporation is a new company and obtains financing by issuing common stock to investors for $30,000. During the year, Gem earns $8,000 in net income and pays stockholders a dividend of $5,000. What is the total stockholders' equity at the end of the year?

$33,000

Keepers, Inc.'s balance sheet reported retained earnings as $10,000 at December 31, 2017 and $12,000 at the December 31, 2018. The income statement reported net income of $3,000 for the year ended December 31, 2018. Dividends declared for the year ended December 31, 2018 must equal $

1000

Margot starts a new business and contributes $20,000 in cash; she also borrows $25,000 from her local bank. She utilizes the cash to purchase supplies for $5,000 and a computer system for $10,000. After these transactions, the company's total resources are:

45,000 Reason: The cash is exchanged for other resources so the total resource amount is $45,000. cash ($20,000 + $25,000 - $5,000 - $10,000) + equipment $10,000 + supplies $5,000 = $45,000

Which of the following aspects relate to the information provided in an income statement?

Ability to earn a profit from its operations during the current period

Which of the following appear(s) on the balance sheet?

Accounts receivable Common stock Utilities payable

Which of these would be found on a company's balance sheet?

Accounts receivable Equipment Notes payable

Which of the following items are found on a balance sheet? (Select all that apply.)

Assets Stockholders' equity Liabilities

Using the accounting equation, stockholders' claims on the resources of the corporation can be expressed as

Assets - Liabilities.

Which of the following is the accounting equation?

Assets = Liabilities + Stockholders' Equity

Which of the following is the accounting equation? Multiple choice question.

Assets = Liabilities + Stockholders' equity

Who serves as an independent intermediary to help ensure that management has appropriately applied GAAP in preparing the financial statements?

Auditors

The financial statement that reflects the accounting equation is referred to as the

Balance Sheet

If investors or lenders were interested in the amount of debt a company currently has, which financial statement would they need?

Balance sheet

Robert Lending Company is considering granting a large loan to Flora Inc. Robert's policy is to lend money only to companies with a relatively small amount of currently outstanding debt. Prior to making a decision, Robert Lending Company should examine which of Flora's financial statement?

Balance sheet

Which financial statement presents the financial position of a company on a particular date? Multiple choice question.

Balance sheet

Which of the following financial statements shows a firm's financial position on a particular date?

Balance sheet

Which of the following accounts is on the statement of stockholders' equity?

Common stock

Which of the following accounts are stockholders' equity accounts?

Common stock Retained earnings

Which of the following accounts are stockholders' equity accounts? (Select all that apply.)

Common stock Retained earnings

Who has the responsibility for preparing financial statements in accordance with generally accepted accounting principles?

Corporate management

Which of the following lends money to a company and expects the company to repay the debt?

Creditor

The title of a balance sheet prepared for the calendar year 2018 includes:

December 31, 2018

The heading of a balance sheet for the 2018 fiscal period will include which of the following? (Select all that apply.)

December 31, 2018 The name of the business The title "Balance Sheet"

Competitors

Decide market share and profitability

Investors

Decide whether to purchase stock

Suppliers

Determine the ability to pay for goods

Which of these would be found on a company's balance sheet? (Select all that apply.)

Equipment Accounts receivable Notes payable

Which of the following items are assets? (Select all that apply.)

Equipment Supplies

______is a term that refers to a code or moral system that provides criteria for evaluating right or wrong.

Ethics

______is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S. (Enter the acronym.)

FASB

is the common abbreviation for the Board that currently establishes financial accounting and reporting standards in the U.S. (Enter the acronym.)

FASB

True or false: Dividends paid to shareholders are recorded on the income statement as an expense.

False

True or false: The SEC has delegated the primary responsibility for setting accounting standards to the AICPA.

False

The private sector organization that is currently responsible for setting accounting standards in the United States is the

Financial Accounting Standards Board.

Generally accepted accounting principles are abbreviated as . (Enter the acronym in the blank)

GAAP

is the common abbreviation for the Board that currently establishes global accounting and reporting standards.

IASB

Where is the time period covered by the income statement found?

In the heading

Where is the time period covered by the income statement found? Multiple choice question.

In the heading

The financial statement that summarizes revenues and expenses for a period of time is the

Income Statement

Which financial statement reports revenues and expenses? Multiple choice question.

Income statement

Which of the following are financial statements? (Select all that apply.)

Income statement Balance sheet Statement of stockholders' equity

Norton Corp. has revenues of $5,000 and expenses of $2,000. What is the total effect on retained earnings?

Increases $3,000

The organization that develops global accounting standards is the

International Accounting Standards Board.

The purpose of the International Accounting Standards Board is to develop a single set of global accounting standards, which are referred to as

International Financial Reporting Standards.

Which of the following item(s) is (are) assets

Inventory Supplies

The accounting equation is: Assets = ______ + Stockholders' Equity.

Liabilities

Who has the responsibility to apply accounting standards when communicating with investors and creditors?

Management

accounting deals with the concepts and methods used to provide information to an organization's internal users

Managerial

_________ accounting deals with the concepts and methods used to provide information to an organization's internal users.

Managerial or management

Which of these appears on both the income statement and the statement of stockholders' equity

Net income

Which of the following appear on the statement of stockholders' equity?

Net income Dividends Beginning balance of retained earnings

An income statement includes which of the following items?

Net income Revenues Expenses

Which of these would be found on a company's balance sheet? (Select all that apply.)

Notes payable Accounts receivable Equipment

Which of the following items are reported on the balance sheet as liabilities? (Select all that apply.)

Notes payable Wages and salaries payable

Investor

Owns stock in the company

Creditors

People who lend money

Which of the following are attributes of FASB? (Select all that apply.)

Private sector organization Independence Full-time board members

Which of these appears on both the statement of stockholders' equity and the balance sheet?

Retained earnings

Which of the following line items appear on an income statement?

Salaries expense Supplies expense Service revenue

Dividends paid to shareholders is on which financial statement?

Statement of Shareholders' Equity

The four financial statements published to provide information to external users include which of the following?

Statement of Stockholders' Equity Statement of Cash Flows Income Statement Balance Sheet

Which financial statement shows the changes in common stock and retained earnings? Multiple choice question.

Statement of stockholders' equity

The accounting equation is: Assets = Liabilities + Multiple choice question.

Stockholders' Equity

The heading of an income statement should include which of the following?

The name of the business The accounting period covered by the statement The title of the financial statement

The heading on the Statement of Stockholders' Equity includes which one of the following?

The period of time covered

True or false: The statement of stockholders' equity indicates the changes in the various equity accounts.

True

Which of the following appear(s) on the balance sheet?

Utilities payable Common stock Accounts receivable

Identify which of the following are included in the heading of the statement of stockholders' equity for Xoff, Inc. (Select all that apply.)

Xoff, Inc. Statement of Stockholders' Equity The period of time covered by the statement

Regulators

decide on social welfare

Managers

decide production and expansion

Customers

decide whether to purchase products

A net loss ______ retained earnings. Multiple choice question.

decreases

A distribution of net income to owners is called a(n)

dividend

A(n) _______ is a distribution of net income to the stockholders of a corporation.

dividend

The two sources of stockholders' equity are amounts ______.

earned by the corporation paid in from shareholders

A code or moral system that provides criteria for evaluating right and wrong is referred to as

ethics.

Salaries already paid to employees for the month is a(n) ______ account that appears on the ______.

expense; income statement

A(n) ______ is a cost of doing business that is necessary to produce ___. Multiple choice question.

expense; revenue

Measuring business activities and reporting those measurements to external parties is the function of ______ accounting

financial

Statements represent a company's primary means of communicating information to external users.

financial

Companies communicate information about their business activities primarily through

financial statements.

The three classifications on the statement of cash flows are cash flows from (Select all that apply.)

financing activities. investing activities. operating activities.

If the SEC does not agree with a standard issued by the private sector, it can

force a change in the standard.

The income statement is considered most useful for predicting

future profitability.

The abbreviation GAAP stands for Multiple choice question.

generally accepted accounting principles

When accountants face an ethical dilemma, the first step in resolving the dilemma is to Multiple choice question.

identify the ethical decision

Information that best explains companies' stock price performance is reported in the________ . (Enter one word per blank).

income statement

The financial statement that is most useful in explaining a company's stock price performance is the

income statement.

The statement used to predict future profitability and a company's future cash-generating ability is the Multiple choice question.

income statement.

When revenues are greater than expenses, a company has net_______ , whereas when revenues are less than expenses, a company has a net______

income, loss

When a company earns net income, its retained earnings:

increase

A company reports a net loss if its revenues are________than its expenses

less

A balance sheet lists the assets,_________ and stockholders' equity as of a specific date.

liabilities

Accounts that include the term "payable" typically are classified as

liabilities

Amounts owed to creditors are

liabilities

Any amount owed to a creditor is classified in the balance sheet as a/an

liabilities

The primary functions of accounting are to:

measure a company's activities. communicate information to decision makers.

In our society, the two main functions of accounting are to

measure business activities. communicate information to investors and creditors.

The difference between two amounts is described using the term

net

Revenues minus expenses equals

net income

Pizza Aroma generated $11,000 in revenues and had expenses of $6,000. Pizza Aroma's net income or loss is:

net income of $5,000

When expenses are greater than revenues, it is referred to as

net loss

The statement of cash flows classifies items as

operating, investing, and financing.

Auditors express a professional on the compliance of financial statements with GAAP. (Enter one word per blank)

opinion

Many liabilities are referred to as ______ to indicate that amounts must be paid. (Enter one word per blank)

payables

Careers for accounting professionals typically include a choice between public and _____ accounting.

private

The two primary functions of financial accounting are to: Multiple select question.

provide information for internal users. measure business activities.

The objective of financial accounting is to:

provide useful information for external decision makers

An advantage of the corporate form of organization is that a corporation

provides limited liability to stockholders.

The two main career paths in accounting are referred to as:

public private

Undistributed profits that have accumulated in the company over time are called _____ earnings.

retained

The accumulated net income earned since the inception of the corporation and not yet paid to shareholders is referred to as _________ . (Enter one word per blank.)

retained earnings

is the amount recorded as a result of the sale of products or services to customers. (Enter only one word.)

revenue

An income statement reports: (Select all that apply.)

revenues expenses net income or loss

Net income equals:

revenues minus expenses

Revenues are:

sales of goods or services to customers

Ending retained earnings appears on the: (Select all that apply.)

statement of stockholders' equity balance sheet

The purpose of an income statement is to

summarize the profit-generating activities that occurred during a particular reporting period

Financial accounting should provide information that: (Select all that apply.)

tells about economic resources, claims to resources, and changes in resources and claims helps to predict cash flows is useful to investors and creditors in making decisions

Expenses are

the costs of doing business that are necessary to produce revenue

In accounting, the term net is used to describe

the difference between two amounts

Stockholders' equity is

the owners' claims to resources of the corporation.

Rank the following steps applied in ethical decision making in the proper order beginning with the first step.

1. Identify the ethical decision at hand 2. Specify the alternative courses of action 3. Evaluate the courses of action in terms on their impact on stakeholders. 4. MAKE A DECISION

The system that maintains records of a company's operations and then communicates that information to decision makers is referred to as

accounting

The two main functions of ______ are to (1) measure business activities and (2) to communicate those measurements to investors and creditors. (Enter only one word.)

accounting

A company owns an economic resource that will provide it with future benefits. This economic resource is

an asset.

A(n) _____, is a resource, such as cash, land, or buildings, that is owned by a company.

asset

A(n)______ is a resource, such as cash, land, or buildings, that is owned by a company.

asset

For a corporation, the owners' claims to the resources of a company are called

assets

The financial statement that displays a firm's financial position on a particular date is the

balance sheet

Which financial statement presents the financial position of a company on a particular date?

balance sheet

Ending retained earnings is calculated as

beginning retained earnings + net income - dividends

Accountants' primary information-related roles are to:

communicate measurements of companies' activities to others Measure companies activities

Accountants' key roles are to measure the activities of the company and to

communicate that information to others.

The purpose of the International Accounting Standards Board is to: (Select all that apply.)

converge national standards with IFRS develop global accounting standards

A business organization that is legally separate from its owners is called a(n

corporation

The balance sheet shows that a company's resources equal _____ claims to those resources.

creditors claims plus owners'